March has seen two of the largest Mexican pension funds tap international fund managers for their Asian equity expertise.
First, Afore Citibanamex handed a $550 million Asia mandate to Pioneer, Wellington and Nomura which was followed up by Afore XXI Banorte increasing its Asia mandate to $850 million. The $30.4 billion pension fund handed $700 million to BlackRock, JP Morgan and Investec topping up the $150 million it awarded to Pioneer last November.
Asian equities have been subject to lots of volatility over the last few years but have staged a decent recovery in the last few months. The MSCI Asia Pacific ex Japan index has returned 10.6% over the last three years.
It’s likely the asset class will be challenged by rising US interest rates, a stronger US dollar as well as Donald Trump’s protectionist policies. However positives still abound as Asian companies continue to improve cash flows and corporate governance which in turn is boosting earnings.
In this analysis, Citywire Americas takes a look at the best performing managers in the Asia Pacific ex- Japan equity sector over the past three years.
Of the 296 fund managers Citywire tracks in this space, the average manager has underperformed the MSCI index, returning 7.16% over a three year period ending in February 2017. We’ve highlighted the top three performing fund managers below:
3. Jonathan Pines, Hermes Investment Management
- Fund: Hermes Asia ex Japan Equity
- Three-year return: 32.7%
London-based Jonathan Pines took on the Hermes Asian ex Japan strategy at its inception in 2012. The manager has a contrarian approach and aims to outperform in falling markets.
The Citywire AAA-rated manager’s top country holding (and biggest overweight) is Korea, which makes up 36.8% of the $2.7 billion portfolio. The MSCI benchmark only holds 17.4% in the country.
His tilt toward Korea sees him take on holdings in companies such as LG Chemicals and video game business Nexon.
The fund is also underweight financials and has no holdings in Indonesia, Malaysia or the Philippines.
2. David Raper & Emil Wolter, Comgest Asset Management
- Fund: Comgest Growth Asia Pac ex Japan
- Three-year return: 43.1%
The duo taking the second slot are Citywire AAA-rated David Raper and Citywire AA-rated Emil Wolter of the Parisian firm Comgest. The two have been managing the firm’s $335.7 million Asian equity ex-Japan since 2009 and 2014 respectively.
China makes up for almost half of the firm’s allocation at 44.9%. The fund also has 19% in Indian equities, in comparison to its benchmark’s 7.8% allocation.
In a commentary from the fund’s latest factsheet, the duo had their returns buoyed by Chinese Internet and technology company NetEase, as the firm’s latest profits beat even the managers’ expectations.
A third of the fund is dedicated to IT companies. Consumer discretionary also makes up about 19.7% of the fund, in contrast to the 8.1% the benchmark has allocated.
1. Tom Naughton, Prusik Investment Management
- Fund: Prusik Asian Equity Income
- Three-year return: 43.12%
It shouldn’t come as a surprise that at the top of the list is Tom Naughton of Prusik Investment Management, as the firm specializes in Asian equities.
The absolute return fund aims to outperform the MSCI Asia Pactific ex Japan Index by 5% to 10% annually. While there is limited public information available on the $500 million fund, Naughton’s value-based performance has proved popular enough to recently close the fund to new investors.